Severin' Ties

In a move that surprised many industry insiders, Roche announced that Franz Humer would be stepping down as CEO in March 2008. Humer will be handing the reins over to Roche wunderkind, Severin Schwan, who at the age of 40 willl be promoted to CEO from his current role as chief of Roche's diagnostics unit.

Humer, 61, has been with Roche since 1995. He assumed CEO status in 1998, and reports say he will stay on as Roche's chairman in addition to assuming the role of chairman of the board of Diageo, the world's largest premium alcohol business, where he has been a member of the board since 2005.

But don't get the impression that Humer's role as Roche CEO drove him to drink: In fact, Roche's first half of 2007 profits posted increases in Group sales of 15 percent; 18 percent in its pharmaceutical sector; and five percent in the company's diagnostics division on Humer's watch.

"Some CEO's are forced out under the pressure," said Peter Young of Young & Partners. "But this is a completely different case. Roche hasn't had a perfect history, but they do hae a strong diagnostics unit and a reasonably strong pharmaceutical unit. And Roche has avoided the train wreck that has plagued other pharmaceutical companies in terms of product failures. So they're not among the walking wounded. I think this move reflects an industry trend to separate CEO and chairman roles so that the chairman can focus on the shareholders' needs and not have to run the business."

And speculation is that more big pharma companies will follow Roche's lead: A report surfaced this week citing the Swiss newspaper SonntagsZeitung as saying that Novartis CEO Daniel Vasella is considering nominating the comany's current Vaccines & Diagnostics chief executive, Joerg Reinhardt, as his intended successor.

"I think it's a positive move for the industry and a reflection of a global trend we've been seeing," said Damien Conover of Morningstar, Inc. "There's been a desire to split the chairman and CEO roles for greater objectivity in senior management positions. It provides better objectivity and more accountability to shareholders."

Conover also said that the hand-off of the baton from Humer to Schwan also represents a shift from Humer's legal prowess to Schwan's expertise in diagnostics. Schwan, who has been with Roche since 1993, does have a background in law and economics, but his enthusiasm -- and his success -- in moving Roche's diagnostics unit forward reflects the importance Roche now places on diagnostics.

And Roche's recent bid for Ventana -- as well as its purchase of BioVeris Corp., and interest in acquiring NibleGen -- seems to substantiate that claim. In addition, earlier this month, Roche Holding AG in Zurich announced a reportedly $1 billion partnership with Cambridge, MA-based Alnylam to develop treatments based on cutting-edge technlogical approaches.

"(Alnylam) offers us entry to new technology platforms to develop medications," Schwan said in an interview with AFX News Limited. "It opens up a new front in biotechnology."

Such statements have led many insiders to view Schwan't ascension as evidence of Roche's emphasis on diagnostics as a core component of its business plan for the future.

In terms of leadership styles, Roche spokesman Al Wasilewski said it was premature to comment on anticipated change in Roche's business model,

"There is a shift in key leadership away from R&D; or legal like Pfizer; or manufacturing, like Merck," conover said. "There's so much growth potential in diagnostics that it does underscore Roche's interest in that area."

Young agrees: "It's definitely a changing of the guard," Young said.
"Schwan is young and not prone to following conventional wisdom."